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Uranium Week: Uncertainty Reigns

Weekly Reports | Feb 01 2022

This story features PALADIN ENERGY LIMITED. For more info SHARE ANALYSIS: PDN

Kazakhstan, Ukraine and volatile financial markets have kept buyers out of the uranium spot market recently. Bell Potter initiates coverage of Paladin Energy

-Multiple uncertainties spooking uranium market
-Speculative Hold for Paladin

By Greg Peel

Uranium industry participants gathered in Washington DC last week (in person!) for the Nuclear Energy Institute's Nuclear Fuel Supply Forum, at which industry consultant TradeTech reports geopolitics and inflationary pressure on the financial markets took centre stage in almost every discussion.

While participants feel reassured the recent political unrest in Kazakhstan will not disrupt Kazatomprom's near-term production or deliveries, it remains a topic of concern.

More pressing is the Ukraine situation, along with significant volatility in financial markets since the Fed turned hawkish in the face of persistently high inflation. Volatile financial markets have affected all segments of the uranium industry from rising producer costs and supply chain shortages to a lack of investment in equities and funds, TradeTech notes.

The Sprott Physical Uranium Trust, which has averaged purchases totalling 221,000/lbs U3O8 per day since the fund was launched in mid-August of last year, has been largely absent from the uranium market these past two weeks. The fund currently holds nearly 44mlbs U3O8.

The recent lack of buying interest had extended beyond the SPUT, due to above-mentioned uncertainties. TradeTech reports only 200,000lbs U3O8 equivalent changed hands last week. It is nevertheless not unusual for activity to dry up when participants are all attending one global forum or another.

Combine a lack of buyer interest and uncertainty and sellers stepped into the market last week and accepted some “exceptionally” low bids from buyers.

TradeTech’s weekly spot price indicator has fallen -US$1.35 to US$43.15/lb.

TradeTech’s term price indicators remain at US$43.00/lb (mid) and US$45.00/lb (long term).

Paladin Energy

Australian stockbroker Bell Potter feels a successful restart of Australian-based Paladin Energy’s ((PDN)) Langer Heinrich mine in Namibia is fully priced in by the market, and therefore initiates coverage of the stock with a Speculative Hold rating and a target of 88c.

The broker includes a valuation for the company’s exploration tenements in the states of Western Australia and Queensland, despite both state governments currently banning the mining of uranium.

Three mines already in development ahead of a change of government are exempted from the ban in Western Australia. A long line of Queensland premiers have considered a lifting of the uranium ban as political suicide given the number of residents employed in the state’s extensive coal mining industry.

Upside to Paladin’s valuation may derive from expansion of the resource base, extending the Langer Heinrich mine life and/or materially higher uranium prices, Bell Potter quite obviously points out.

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